SINGAPORE - Prices of Housing Board resale flats grew at a slower pace of 0.9 per cent in the first quarter of 2023, compared with the 2.3 per cent increase in the previous quarter, with some analysts citing this as a sign of price resistance setting in.

The 0.9 per cent rise also marks the smallest quarterly increase in the last 10 quarters – or 2½ years – flash estimates from HDB on Monday showed.

In recent years, the issue of home affordability has increasingly come under the spotlight as HDB resale prices have risen by 31.9 per cent over the last 12 quarters.

The rise in public housing prices is higher than the 27.9 per cent increase over the same three-year period in the private residential property market.

OrangeTee & Tie senior vice-president of research and analytics Christine Sun said the slower pace of price growth in the first quarter of 2023 indicates that the latest round of property cooling measures has been effective in tempering market exuberance.

“The real estate buying frenzy may finally be over,” she said.

“Six months after the property curbs, the HDB resale market is showing more signs of cooling as price gains weakened further and sales demand stabilised in the first quarter.”

Since Sept 30, 2022, private property downgraders have had to wait 15 months after selling their private homes before they can buy an HDB resale flat. The move was aimed at moderating demand from this group of buyers, who typically have a bigger budget and prefer larger resale flats.

Other measures include limiting how much buyers can borrow for their home loans, and a more stringent total debt servicing ratio and mortgage servicing ratio.

ERA Realty key executive officer Eugene Lim said property agents on the ground have observed more buyers exercising restraint in their re-offer prices when their initial offers were turned down by sellers, as it could mean paying more cash over valuation (COV).

COV is the difference between the sale price of a flat and its actual HDB valuation, which can be paid for only in cash by the buyer.

Buyers who are not eligible for an HDB home loan may also be deterred by floating bank loan rates, which currently stand at over 4 per cent, said Mr Lim.

Analysts cited more homes being completed in the past months and an increased housing supply in the pipeline as another reason for the price softening.

Real estate veteran Nicholas Mak said the ramp-up in new Build-To-Order (BTO) flat supply in the last year and the years ahead is bearing fruit by drawing more home buyers from the HDB resale market to the BTO market.

“The Government’s consistent communication of the supply and construction of BTO flats to the public is yielding positive results, with many home buyers gradually becoming more confident and interested in the BTO market,” he said.

HDB has said it is prepared to launch up to 100,000 flats from 2021 to 2025.

Beyond the increased supply of new flats, first-time buyers have also been given more financial muscle to buy four-room and smaller HDB resale flats since March 2023 after an up to $30,000 boost in the CPF Housing Grant.

Data showed that buyers are increasingly turning to four-room and smaller resale flats, which made up a higher proportion of transactions compared with five-room and larger flats.

OrangeTee’s Ms Sun noted that the proportion of four-room and smaller flats climbed from 69.7 per cent in the fourth quarter of 2022 to 71.5 per cent in the first quarter of 2023. In the same period, the proportion of five-room and larger flats dipped from 30.3 per cent to 28.5 per cent.

One Global Group senior analyst Mohan Sandrasegeran said smaller flats tend to fetch lower prices, and the increased grants have made the overall cost even more affordable.

However, the number of HDB flats changing hands for at least $1 million or more continued to go up.

Mr Sandrasegeran noted that there were 103 such deals in the first quarter of 2023, up from 92 units in the fourth quarter of 2022.

One reason could be that buyers who have the financial capabilities and cannot find suitable options in the private resale market are turning to the HDB resale market to get more bang for their buck, he said.

Ms Sun predicts that HDB resale prices may continue to climb, but at a slower pace of 5 per cent to 8 per cent in 2023, compared with 10.4 per cent in 2022 and 12.7 per cent in 2021.

Meanwhile, HDB resale volume in the first quarter of 2023 is estimated to be about 6,880 units, about 1 per cent higher than the 6,810 units in the same period in 2022, flash data showed.

In May, HDB will launch about 5,400 BTO flats in towns such as Bedok, Kallang/Whampoa, Serangoon and Tengah.

In August, between 5,200 and 6,200 flats in towns such as Bukit Merah, Choa Chu Kang, Kallang/Whampoa, Queenstown and Tengah will be offered.